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Permanent Pro-Growth Tax Policy Is The Key To Economic Recovery


As businesses begin to open up after the COVID-19 lockdown, President Trump has promised a “Great American Comeback” for the economy. Unfortunately, temporary tax provisions passed by Congress make it difficult for businesses to plan for the crucial months ahead. To ensure economic recovery, Congress and the president must stop passing temporary stopgap measures and replace them with permanent pro-growth policies.

Permanent tax policy is important because it helps businesses plan for the future. It is difficult for people to expand their business by hiring more employees or make critical investments that grow the economy if they are worried about the tax code changing. Furthermore, since the choice between hiring full-time employees or investing looks toward the future, the threat of possibly paying more in taxes looms large. With over 40 million Americans currently unemployed, permanent pro-growth policies are needed to provide businesses the certainty required to rehire their workers.

Carryback Provisions Are Crucial for Businesses

One of the most crucial tax provisions that help businesses survive during tough economic times is the Net Operating Loss (NOL) deduction. This deduction allows businesses to carry forward their losses to future years to offset lost income during recessions, and it traditionally also allows businesses to carryback their losses to previous tax years to receive an immediate refund on previously paid taxes. The carryback provision is crucial because it gives businesses needed liquidity when their cash flow dries up during tough economic times. The deduction mitigates the tax code bias against the risk that entrepreneurs take to start a business and so fosters job creation in turn.

In recent years, however, the tax code’s treatment of NOLs has not been consistent nor permanent. The 2017 Tax Cuts changed the NOL deduction to allow businesses to only carry forward 80 percent of their losses,

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The Federalist

A web magazine of culture, entertainment, and politics. Be lovers of freedom and anxious for the fray.

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